Cytel Corp. Hopes to Emulate Hybritech's Formula for Success

SAN DIEGO — When Howard E. (Ted) Greene began knocking on investors' doors in 1978 looking for money to start a biotechnology company, he was met with a cool reception. How could he hope to compete, the investors asked, with established pharmaceutical giants such as Merck, Eli Lilly, Smith Kline and others in pursuing blockbuster drugs and diagnostic products?

Nevertheless, Greene and his associates at San Diego-based Hybritech proceeded to teach the pharmaceutical industry an object lesson in how to beat the big boys. Under Greene, who was both chief executive and co-inventor of a critical patent, Hybritech became the first drug company to commercialize monoclonal antibody technology, introducing a broad range of diagnostic products.

Hybritech also embarked on clinical tests of the first therapeutic drugs based on monoclonals, including a liver cancer treatment that Hybritech stands a good chance of bringing to market over the next several years.

Bought by Eli Lilly

Hybritech's products and patent position--the strongest in the monoclonal industry, analysts say--persuaded Eli Lilly to buy Hybritech for $480 million in 1986, making Greene and many other executives and stockholders wealthy.

"When people asked how in the world we could compete against those folks, my answer was that, when you are working in an area where ideas count the most, it's not how many salespeople you have in your organization that is going to be the difference between success and failure," Greene said.

"In this new technology, the problems to be solved will be solved by a few people, not by armies of people," Greene said. "And it's better that these people be all together, working toward the same goal, operating on a first-name, verbal-communication basis than scattered among thousands of employees at some pharmaceutical company."

Recently, Greene again was out pounding doors to raise money for his latest venture called Cytel Corp., a San Diego company trying to develop immunomodulators, or drugs that fight disease by mobilizing or blocking the body's immune responses. Greene is Cytel's chief executive.

As one might expect, Greene's pleas for money met with a much friendlier reception from investors than 10 years ago. Greene's role in Hybritech's success story is well known in venture capital circles and investors were downright eager to become a part of Cytel.

"They paid attention this time," Greene said.

Last week, Greene collected $6 million from leading U.S. venture firms, including J.H. Whitney of New York, Morganthaler Ventures of Cleveland, billionaire Henry Hillman of Pittsburgh and Sutter Hill Ventures of Palo Alto. The funds will enable Cytel to lease a 13,000-square-foot building in Torrey Pines and to double a staff that now numbers 20, 17 of whom are scientists.

Seed capital totaling $1 million was provided to Cytel last summer by Biovest Partners, a San Diego venture capital firm that Greene started after the Lilly buy-out with fellow Hybritech alumnus Timothy Wollaeger.

Backed by Big Names

In promoting Cytel, Greene had more than his Hybritech track record to fall back on. Dr. Howard Grey, formerly chief of immunology at National Jewish Center for Immunology and Respiratory Medicine in Denver, has joined Cytel as chief technical officer. Grey has been at the fore of research in major histocompatibility (MHC) molecules, which are present on the surface of all human cells and which signal to the body's immune system that an "invader" organism is present and should be wiped out.

Grey's research on MHC will provide the basis for Cytel's products, Greene said. He refused to say which products Cytel will try to develop first.

"When the history of immunology is written 10 years from now, it will be shown that MHC molecules represented the key to the development of therapeutic drugs for controlling immune responses," Greene said. "Howard Grey is the man who has been doing the leading work in understanding how MHC activates that response."

Grey, 55, has also persuaded half a dozen of his research associates at National Jewish Center to leave academia and join him at Cytel. He has also helped Cytel recruit 10 other top scientists.

Cytel has also received a seal of approval from Scripps Clinic and Research Foundation of La Jolla, the site of some of the world's most advanced immunological research. Scripps Research Institute director Richard Lerner is a member of Cytel's board of directors, and Cytel's scientists are leasing temporary lab space at Scripps until Cytel's building is ready.

Lerner's association with Cytel is particularly valuable because he helped pioneer "rational drug design," a method of designing purely synthetic molecules to cause a specific biological response, Greene said. Cytel plans to use those design methods to bring along its line of products.